A Manufacturing Company Is Considering Two Alternative Locations for a New

question 31

Essay

A manufacturing company is considering two alternative locations for a new facility. The fixed and variable costs for the two locations are found in the table below. For which volume of business would the two locations be equally attractive? If the company plans on producing 6,950 units, which location would be more attractive?
$$\begin{array} { | l | l | r | } \hline & \text { West } & \text { East } \\\hline \text { Fixed cost } & 137500 & 162300 \\\hline \text { Variable cost } & 17.5 & 14.3 \\\hline\end{array}$$

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Definitions:

Product-Level Activity

Activities and costs associated with a specific product, rather than with a business operation as a whole.

Testing Prototypes

The process of evaluating the design, functionality, and performance of pre-production models or samples of a new product.

Personnel Administration

Management and administrative processes involved in hiring, training, and managing employees.

Direct Labor Hours

These are the total hours worked by employees directly involved in the manufacturing process or production of goods.